Gauge of U.S. business investment plans edges lower

WASHINGTON

Shipping cranes are seen at the port of Portland, Oregon, November 17, 2005.

WASHINGTON (Reuters) - A gauge of U.S. business investment plans dropped in December, a possible sign companies were losing confidence in the economy's strength due to fears over tighter fiscal policy, government data showed on Monday.

The data from the Commerce Department also gave some positive signals, with a big jump in defense industry orders suggesting some of the surprise fall in U.S. economic output late last year was poised to reverse.

Many economists have expected businesses to invest more timidly because of uncertainty over government spending cuts and tax increases, which had been scheduled to kick in last month. Congress ultimately struck a last-minute deal to avoid or postpone many of the austerity measures.

Signs of any blow to confidence have been difficult to discern from economic data, but Monday's data provided a hint of weakness in December.

The government issued a revised estimate for capital goods orders outside of the defense and aircraft industries, showing they edged 0.3 percent lower in December.

Previously, the government had estimated this closely watched proxy for investment plans had gained 0.2 percent during the month.

U.S. stocks opened lower on Monday, while U.S. Treasuries prices rose.

Overall factory orders rose 1.8 percent during the month. That was below the median forecast of 2.2 percent by analysts polled by Reuters.

Outside of the transportation industry, growth in factory orders rose a meager 0.2 percent in December, with new orders for consumer goods down 0.1 percent.

More volatile components helped make up for that softness, with civilian aircraft orders up 10.1 percent.

Military aircraft orders surged by 56.4 percent, a sign that defense spending could rebound after declining sharply in the fourth quarter.

The drop in defense spending dragged heavily on the economy in the fourth quarter, when gross domestic product posted a surprise contraction according to an advance estimate released last week.

Outside of the defense industry, new factory orders rose a modest 0.3 percent.